As your profession becomes increasingly crowded and competitive, it is paramount to create a competitive pricing structure. This is the first step toward attracting clients. Whether you are a life coach or business consultant, setting the price is always an uphill task. While you want to attract more clients, you should set prices that will precisely reflect the energy, time, and value you are giving to them.
So, how much should you charge? There are many ways to price your services. The ideal pricing model for you depends on various elements, such as your market, experience, and ideal client. While most consultants think of hourly rates, it is not always the best.
Factors to Consider when Determining Coach Pricing
Typically, there is no definite amount that a consultant should charge. There are a set of factors that you should take into account before settling on your final pricing. These include:
- The Client- Different clients, based on the size of their businesses, will pay differently.
- Market- Executive, career, and leadership coaches charge differently from life, health, and wellness coaches.
- Geography- The location in which the client resides or where the business is located matters a lot. For instance, you can charge a big tech company in New York $20,000, while charging $12,000 for the same services to a client located somewhere else.
The Most Common Pricing Models
Here are Four Pricing Models that you should consider:
It is considered the simplest way to bill your clients for your services. Since you may not be in a position to determine how long the consultation will take, you agree on what you would charge per hour. If, for instance, you agree to charge $50 per hour and work for 20 hours, you receive $1,000.
As noted by Forbes, hourly billing has been there in many sectors. If you have sought services from a lawyer in the past, then you understand what hourly billing means. The same case applies to most accountants. It is considered clean and simple.
However, hourly rates might be bad for you and your client. As indicated in a recent study by the Harvard Business Review, most people who use hourly billing overestimate their available time and underestimate their expenses.
Here are the main problems with Hourly Billing:
- This Pricing Model is More About You- Let’s be realistic. The starting point of hourly billing is you, primarily your needs, expenses, and lifestyle. While you focus more on how much you will make, customers think about how much it will cost them.
- Hourly Rates May Put Off a Potential Client- Simply put, hourly billing sounds expensive. Imagine hiring a speaker who charges $100 per hour and works for 5 hours. Another one quotes $500 for the whole job without mentioning hourly charges. Most likely, this one will be hired since the client will not understand why they should pay you $100 per hour.
- You are More like a Commodity- Ever gone shopping? It is normal to compare prices. If you charge $150 per hour, the client will probably research around to see if there is another consultant who charges $120 per hour. The customer will view the two of you as two different sellers offering the same product at different prices. In this context, your services become more like a commodity that is subject to bargaining.
- It is Tedious- Imagine a situation where you provide services for 30 days and each day you work for different hours. You will have to cope with intensive record keeping.
If a client consistently requires your services, then you can sign up for a retainer agreement. In this contract, the client pays you in advance for services to be provided at a future date. As a coach, you agree to be available for a specified number of hours within a certain timeframe.
As identified by the Corporate Finance Institute, the service provider receives a regular monthly fee and agrees to provide a set number of hours of service. It is popular in the consultancy sector.
If you choose retainer agreements as your preferred pricing model, you will enjoy the following benefits:
- You are paid on a continuous basis. In short, you will never struggle with variable income.
- If you have several retainers, it saves your time spent sourcing for new clients.
- You focus more on providing services to your clients, and improving your reputation.
Although the idea sounds fantastic, it has several drawbacks. These include:
- You become less flexible. When you sign the agreement, you lock yourself into a specific schedule.
- Since you might always be occupied with several clients, you may miss more profitable opportunities.
This pricing model mainly takes the form of packages. You need to first identify the goals and challenges of a particular client and develop a comprehensive package to address them. According to the Harvard Business Review, about 20% of coaches and consultants prefer bundled pricing. They come up with a package and quote a price for it.
Typically, bundled pricing involves three elements:
- Establishing the Results- you need to explain how the client will benefit from the package. For example, you can say, “I will increase your workforce’s productivity and leadership effectiveness within the 2-week training period.” In short, you will be selling results. In this context, you should highlight all the tangible results expected from the service you are providing.
- Bundling Several Tools Together- Describe different ways in which you will provide your services, such as instructor-led training, use of handouts, PowerPoint presentations, online classes, interactive sessions, question-answer forums, and focus-group discussions, among others.
- Price the Package- Once you have comprehensively described the package to the client, then you can price it. For a business, you might charge $5,000 for the entire training session, while you can quote $30,000 for big firms. If you are dealing with an individual, such as a business owner or executive, you can charge 50% of their monthly salary.
The use of value-based fees has also gained immense popularity in the recent past. As a consultant, you should know that people hire you because they want positive results. According to the Forbes Coaches Council, more than 70% of clients prefer coaches who price based on the results that clients receive.
How do you do value-based pricing? This is a tricky question for most consultants. Basically, there are 4 options:
- Base your Prices on Client’s Results- Imagine a situation whereby you coach a fundraising team, and they raise their donations by $3,000 within a month. Also, imagine working with a CEO, and the result is a 50% increase in organizational profit. Always look at the monetary value of results and use them to base your pricing. During a consulting value conversation, you can ask your buyer meaningful questions about the value that would be created when the problem at hand is solved. The answers you receive tell you the value that you are bringing into the organization and form the basis of your fee.
- Price Based on Difficulty- Once the client outlines the expected outcomes, judge how difficult it will be to achieve them. Assessing the difficulty enables you to estimate the time and effort needed to accomplish a certain task. Then you can come up with an appropriate price.
- Assess the Client’s Ability to Pay- Always analyze the organization’s financial capabilities. There is a difference between a small business owner and a corporate executive. You should always adjust fee expectations based on different types of clients.
- Look at the Expertise you Provide- You know yourself better than anyone else. In other words, how do you view yourself? What are your areas of expertise and what results will you achieve with the client at the end of the training? While some consultants charge $100 for a single appointment, others will charge up to $250. The difference is their skills, experience, reputation, and demand.
The Bottom Line
No matter what business you are in, setting the proper pricing is a major determinant of success. You may start with hourly billing and create a reputation with time. As time goes by, you will enhance your value, and you will offer packages or even charges based on the value you create.